• 6 hours The Dairy Industry Is Dying
  • 12 hours The Most Impressive Electric Vehicle Of The Year
  • 2 days Gold Miners Are Having A Stellar Second Half
  • 2 days How 3D Printing Is Turning Each And Every Industry On Its Head
  • 3 days Is The $3.5 Trillion Healthcare Industry About To Get Much More Transparent?
  • 3 days Gamblers Are Betting Big On Trump’s Impeachment
  • 4 days Even Banks Can't Answer Aramco's Trillion Dollar Question
  • 4 days Will Bezos Buy The Seattle Seahawks?
  • 5 days 6 Tech Trends Transforming The Travel Industry
  • 5 days Ousted Uber CEO Cashes Out $500 Million In Stock
  • 5 days Trump Prepares For Another Key Tariff Decision
  • 6 days The Free Money Bubble Is About To Burst
  • 6 days The Crushing Reality Of Poverty In America
  • 6 days Should You Buy Into The World’s Largest IPO?
  • 7 days The Infinite Possibilities Of Cosmic Energy
  • 7 days Analysts Link Walking To Economic Growth
  • 8 days Will Japan Turn Its Back On The Aramco IPO?
  • 9 days Global Debt Soars To $188 Trillion
  • 10 days The World's Largest Gold Miners Are Getting Creative
  • 10 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Yield Curve Steepens Dramatically: What's Going On?

US treasuries are seeing action we have not seen for a while: Strong sharp steepening of the yield curve.

The yield curve is said to steepen when the spreads between short-term and long-term rates increases. The yield curve flattens when spreads shrink.

  • A bearish steepener occurs when rates are rising and long-term yields are rising more than short-term rates. Spreads widen.
  • A bullish steepener occurs when rates are falling and short-term rates are falling faster than long-term rates. Spreads widen.
  • A bullish flattener occurs when rates are falling and long-term rates are falling faster than short-term rates. Spreads narrow.
  • A bearish flattener occurs when rates are rising and short-term rates are rising faster than long-term rates. Spreads narrow.

The terms bearish and bullish refer to capital gains (bullish) or losses (bearish) if one is invested in government bonds.

Bearish Steepener Meaning

A bearish steepener is generally a sign that market participants believe the economy is getting stronger and the Fed (Central Bank), will be hiking rates faster than previously anticipated or more than anticipated.

What Happened Today?

  1. The housing market was stronger than expected: Housing Starts Jump More Than Expected: Economy Overheating?
  2. The current account deficit shrank more than expected: Current Account Deficit Shrinks Due to Hurricanes

June Rate Hike Odds

 https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/VCILyFJSl0m3O0CTYqo7GQ

Synopsis

  • The Fed Funds rate is currently 1.25% to 1.50%
  • The odds of two quarter point hikes through the June meeting increased from 32.5% yesterday to 38.1% today. This is consistent with the bearish steepening of the yield curve.

I did not believe the Fed would hike as much as expected in 2018, and today does not change my mind.

By Mike "Mish" Shedlock

Back to homepage

Leave a comment

Leave a comment